Friday, November 20, 2015

It is becoming
increasingly apparent that China is becoming a "player" when it comes
to the world's superpowers. With their recent moves in the South China
Sea and their displays of game-changing weapons, the United States could find
itself sharing top spot as the world's number one "cop". A recent study by Transparency International
provides us with a glimpse of the secretive nation, showing us that the
People's Republic of China may be spending far more "off-the-books" on defense than either we or its citizens are aware of, leading to both corruption within the PRC and mistrust and instability in
the region.

Transparency
International defines secretive military spending as "military
expenditures where no meaningful details are released either to the public or
to parliament.". To give us a sense of the size of China's spending
on its military, in early 2014, the nation announced that its defense budget would rise
by 12.2 percent to $132 billion dollars after increasing by 10.7 percent in
2013. This high growth rate has caused concern among outside nations,
particularly since China's spending on defense is growing at a far faster rate
than its economy. While there is no doubt that $132 billion is a lot to
spend on defense, as you can see on this
graphic, China's spending on defense still pales compared to that of the
United States:

Let's start by looking at
how the rankings work, followed by a look at Transparency International's
2015 Government Defense Anti-Corruption Index rankings
for the Asia-Pacific Region as a whole, keeping in mind that Asia is home to
some of the world's emerging military powers and fastest growing populations. The Government Defence
Anti-Corruption index measures levels of corruption risk within each nation's
defense system and scores each nation on a scale of A (the best) to F (the
worst). The bands are based on an assessment which consists of 77
questions which each receive a score of between 0 and 4 as follows:

Countries are scored in
five key areas:

1.) Political Risk

2.) Financial Risk

3.) Personnel Risk

4.) Operations Risk

5.) Procurement Risk

Once the assessment is
complete, each nation has the right to conduct a review of their own assessment
and provide further information that may clarify the issues involved.
Transparency International considers nations that have a lack of
transparency in their defense structure to be ones that have a higher risk of
corruption since there are a lack of public and parliamentary checks and balances.

Here is a graphic showing
the 2015 Government Defense Anti-Corruption Index ratings for the Asia-Pacific
Region as a whole:

There are only two
nations that received a poorer score than China; the very secretive Myanmar and Cambodia. As
well, only six out of the seventeen nations in the region publish enough
details about their defense budgets that public oversight could stop potential
corruption from taking place.

Now, let's focus on
China. As I noted above, China has seen substantial growth in its
military budget with very consistent double-digit annual increases in spending
since 1995. In fact, China now accounts for 12 percent of the world's
total military spending.

Here are China's scores
for the five key areas as noted above, keeping in mind that the lower the
score, the lower the level of transparency:

1.) Political Risk: 32
percent

2.) Financial Risk - 23
percent

3.) Personnel Risk - 50
percent

4.) Operational Risk - 15
percent

5.) Procurement Risk - 29
percent

China's score in Band E
puts it in the category of "very high risk" of corruption in the
defense sector.

Most of China's military
spending problems lie in five areas:

1.) Only broad details on
acquisitions and acquisition planning are released to the public.

2.) Only highly
aggregated data on defense spending is available with spending on research and
development, the military component of space exploration and strategic forces
being completely hidden from public view.

3.) The extent to which
spending on the aforementioned items are kept outside of the official budget is
unknown with estimates of off-book spending ranging from 35 to 50 percent of
total defense expenditures.

4.) The expenses for
China's paramilitary forces are undefined.

5.) The revenue created
by corporations that are owned by the People's Liberation Army are undefined.
These corporations are involved in telecommunications, hotels,
transportation services and light industry. Earlier in 2015, China cracked down on PLA personnel that
received income from sources other than their government salaries.

The study shows that
China is now responsible for nearly 30 percent of the world's total secretive
military spending. Off-the-book spending could be as high as 50 percent
of China's total official defense expenditures, totalling as much as $65
billion.
Interestingly, although China's defense policies are supervised by the National
People's Congress, it appears that China's Congress has very little impact on the nation's defense policy and that the defense sector is not accountable to it. In fact, the
research suggests that the United States Congress has received more detailed
information about China's military capability and defense budget than China's
central government. As well, the report suggests that China's citizens
would learn more about their own defense structure from reading foreign press
coverage than they would from their own government.

China's spending on its
military is key to the security of the region. This is particularly the
case in the South China Sea where territorial claims overlap as shown on this
map:

China's lack of
transparency on its defense spending and resulting high risk of corruption
leads to greater instability in the region. On top of that, recent moves
by the United States Navy in the South China Sea have added to the region's
growing instability.

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About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.